Outside the theatre, protesters brandished banners proclaiming "Save the Hackney Empire": the venue is facing a period of closure. Inside, all was warmth and gaiety for the 11th annual Hackney panto, written and directed by Susie McKenna, and making the best case for the theatre's preservation. It's become a critical cliche to say Hackney offers the best pantomime in London. But what is its secret?

Firstly, a respect for tradition. McKenna reminds us that the origins of the Aladdin story lie in A Thousand and One Nights and makes several nods to the source. She begins with a camel who talks in rhyming couplets, she has Aladdin build a palace in 24 hours and, in the second half, she whisks the characters from Ha-Ka-Ney, an eastern suburb of Peking, to Arabian deserts. But tradition is also imaginatively tweaked. The characters are transported not by a flying carpet but by a spectacular dragon, created by Scott Brooker, whose sinuous body bobs and weaves like Ryan Giggs, and has talons that could pick up a builder's skip.

Clive Rowe's dame is synonymous with Hackney panto and his Widow Twankey, though cut from a very different cloth, is more than a match for Ian McKellen's. It helps that he appears in ever more outlandish costumes, designed by Lotte Collett, which at one point involve him tittuping across the stage inside a willow-pattern vase. But willowy Mr Rowe is not, and his charm lies in his mix of avoirdupois and lightness, an innate musicality that enables him to give us a Beyoncé belter, and an ability to buttonhole the audience. Having told a colleague "you've had more chances than Peter Mandelson", he turns to the audience to announce "we did that gag in 2004". Like all the great dames, Mr Rowe is on our side.

McKenna's production admirably fuses past and present. We have a female principal boy, Anna Jane Casey, who even ironically slaps her thigh. David Ashley's glowering sorcerer, Abanazer, supplies what someone calls the hex factor. And there is a pair of comic cops one of whom tells Mr Rowe "you've got more chins than the Chinese phone book". But musical director, Steven Edis, ensures that the show, while giving us golden oldies like Slow Boat to China, speaks to the hip-hop generation. In the end, however, the building itself is a vital part of this panto's magic. Agate once said of the Lyceum that "it enables actors to pour their performances into a cup specially prepared to receive it". The same could be said of Hackney Empire, which one passionately hopes the gods, and the local council, will preserve.